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The Good News – You Received a PPP Loan! The Bad News – Were You Really Eligible?


On Friday, April 24, 2020, the SBA issued new rules regarding the PPP loan program, one area of which focuses on borrower eligibility. When you completed your PPP loan application, you were required to certify that the loan was necessary to support ongoing operations. If you had access to other forms of capital such as available and unused lines of credit, ability to obtain loans from other sources, or significant amounts of cash, investments or equity, you will need to justify why the loan was necessary if and when your application and PPP loan is audited by the SBA.

If you have now determined that the certification on your application was incorrect, and the loan was not needed under the PPP rules, you can return the funds by May 7, 2020, without penalty. Untrue certifications could subject you to a criminal investigation and/or civil proceeding under the False Claims Act.

If you believe you met the need threshold, you should take time now to document your need. The documentation should include some or all of the following:

  • Records of the company's employee count and operating hour requirements

  • Results of operations before the COVID-19 pandemic and subsequent decline

  • Cost of, and access to, capital through traditional and alternative sources of financing

  • Cash reserves

  • Projections or forecasts of post-COVID-19 operations

  • Other statistics or ratios of financial performance

  • A memo summarizing the above and resulting need

Please contact ECS and we will be happy to help you with questions on the above matters, and assistance in documenting need for your PPP loan.

About the Author - Jan Forgue is a senior manager in the assurance group. In addition to planning and managing client attest engagements, she performs firm quality control responsibilities including engagement quality control reviews, coordination of annual monitoring and inspection procedures, update of the firm's quality control policies and practice aids, and provides assistance with complex accounting issues. She assists in expansion of the firm's attest practice, including peer review and accounting and attest consulting services. She is considered a subject matter expert in the employee benefit plan area. She also assists in developing staff through leading in-house training and identifying external CPE opportunities, on-the-job-training, and technical research skills.

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